Assessing Partner Dependency To Maximize Channel Health

Recently I met with a colleague who was lamenting the relationship that had developed with one of his company’s key partners. The partner’s business had grown substantially over the years and now represented a dominant share of revenue. You may be thinking, “Oh, stop whining!” But, in fairness, the partnership was structured around exclusivity, restricting his company from bringing on other partnerships within the same market space. So, while the relationship with this partner remained relatively strong, he worried that his company’s dependency would put it in a vulnerable position. Even though hindsight is 20:20, it’s hard to see the danger signs of an unbalanced partnership while sales roll merrily along each day.

To help assess how healthy your partnership is with any one leading partner, you may want to ask yourself the following questions:

 If the partner was acquired, or its business was affected by market conditions outside your control, to what degree would your business suffer? Having more than one “anchor tenant” protects you if one tenant closes its doors or moves to another location.

 What percent of your resources (and time) can you afford to dedicate to any one partner, and for how long can you sustain that level? Sometimes, the resources lavished on a successful partner can detrimentally affect your ability to respond and nurture an emerging partner. While dedicating precious resources to fewer partners almost always results in a higher quality partnership, dedicating too many of those resources to one partner can put you at risk of losing flexibility and the ability to respond nimbly to new opportunities.

 How much is the partner contributing to the bottom line? While top line results are important, if the partner is costing too much to manage and keep happy, it may be time to consider alternatives. You may be better off letting go of exclusivity or rebalancing your partner portfolio. And, be careful about betting on the promise of revenue for too long. If you haven’t seen revenue progress to match your resource investment after six months, the chance of it happening without intervention is slim.

Even if you ultimately decide that this partnership is worth its weight in gold, it’s wise to insist on a regular partner review to minimize complacency. It’s a good opportunity for both parties to look at progress against the plan and to shift strategies and resources as needed.

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